Posted by: @spdlm | 17 Jul 11

Going Japanese 1 – Trust and Business

My father had a business in Japan. It was a trading company specialising in textiles and water technology. As a foreigner in Japan, he had to go the extra mile to achieve probably the most important milestone; trust. In this new series of blogs, I will cover the subtleties that make Japan what it is.

"Shin-yo" (trust)

Trust

I think, simply put, this word has a whole different meaning in Japanese businesses, compared to US and Europe (the “west”). New or old, east or west, businesses rely on trust, especially amongst small companies. Let’s talk about the practicalities of this trust. In the West, trust tend to have a smaller role to play and many transactions take place and contracts executed without any trust at all. Online skill matching sites such as guru.com or freelancer.com are extreme examples of this. While I am sure the majority of participants on these sites are trustworthy characters, the site removes the necessity to have a contractor/contractee trust by enforcing a payment system that ensures no funds are released if the work quality is unsatisfactory. Admittedly, almost all work listed there are rather mundane and does nor require much experience or qualification. It truly demonstrates the supply and demand of the particular skills required. This kind of site simply does not exist in Japan. For better or for worse, even the simplest of contract requires both parties to assume some trust.

Invoice culture

In Japan, much of the B2C transactions still involves invoices. Many of the products, even for the initial transactions, are shipped with an invoice, which you would pay later at your bank, post office or the convenience stores. This creates a lot of inefficiencies but this system works well in the Japanese society. Unlike the above mentioned sites (Guru and Freelancer), this invoice based culture was not created as a result of supply and demand of the products or the services, but the requirement of trust… business owners trusting their patrons.

No PIN required

When you travel to Japan, you will see some posters warning you to look after your credit card. While Japan remains a cash culture, credit card has been around as long as it has been in most developed nations. What is astonishing, however, is that many of the outlets accepting credit cards do not require PIN or even a signature. Although I can theorise why this is the case, I believe that trust plays a big role. The infrastructure and the technical innovation is in abundance even considering the localisation issue (everything in Japan has to be in Japanese). The business owners are either very trusting people or are forced to that position.

Is it really trust or more like convenience?

By now, you might be thinking, wow Japan sounds like a really trusting nation. Running a business there can’t be that difficult. Or not. The point is, this seemingly trusting nature has its downside, which is that if you chose to practice caution (which can be part of a standard procedure in the West), that can be seen as distrust. For example, many negotiations have fallen appart between the west and Japan when the western counterpart insisted on what they might consider a standard contract to be drawn before either party commit to a transaction. In my mind, and I am sure most of you would agree, that running a business purely on trust is simply reckless, whether you have people depending on you or not. So, if insisting on contracts to be drawn can be seen as distrust, is it really trust they are after, or is it convenience? In almost all cases, dealing with Japanese businesses leave you with above average satisfaction level. There are, however, occasions when things go wrong. Some might ague that this is the precise reason why contracts exist, to deal with unexpected turn of events or disagreements at a late stage in the deal. Even now, the preferred way for Japanese businesses is to deal with such difficult situation on a “best effort basis”.

Shin-yo

If you are considering Japan as your business location, I can reassure you that you would not have much problem with quality of work, delivery time and general satisfaction level of the whole experience, if you are able to accept that “shin-yo” is often seen as the most important part of the transaction.

For more on this topic, watch this space or contact me.


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